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Management Issues in Systems Development Chapter 10 Information Systems Management In Practice 6E McNurlin & Sprague PowerPoints prepared by Michael Matthew.

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1 Management Issues in Systems Development Chapter 10 Information Systems Management In Practice 6E McNurlin & Sprague PowerPoints prepared by Michael Matthew Visiting Lecturer, GACC, Macquarie University – Sydney Australia

2 ©2006 Barbara C. McNurlin. Published by Pearson Education.10-2 Chapter 10 Chapter 9 dealt with developing systems This lecture / chapter looks at the issues surrounding systems development: –Project Management What is it Change Management Risk Management –Ways to replace legacy systems, and –Measuring the benefits of systems Case examples include the BOC Group, Down Corning, GTE Directories, Amazon.com, Toyota Motor Sales, Wachovia and a trucking company

3 ©2006 Barbara C. McNurlin. Published by Pearson Education.10-3 Today’s Lecture Introduction Project Management –What is Project Management –The Job of a Project Manager –Change Management –Risk Management –Tips for Good IT Project Management

4 ©2006 Barbara C. McNurlin. Published by Pearson Education.10-4 Today’s Lecture cont. Improving Legacy Systems –To Replace or Not to Replace? –Options for Improving a Legacy System Measuring the Benefits of Systems –Distinguish Between the Different Roles of Systems –Measure What Is Important to Management –Assess Investments Across Organizational Levels –Do Investors Value IT Investments?

5 ©2006 Barbara C. McNurlin. Published by Pearson Education.10-5 Introduction Chapter 10 deals with issues surrounding system development Companies are in three ‘businesses’: 1.Infrastructure Management 2.Customer Relationship 3.Product Innovation Traditionally companies have bundled the three (businesses) –Leads to compromises because the three have conflicting agendas

6 ©2006 Barbara C. McNurlin. Published by Pearson Education.10-6 Introduction cont. IS departments can be viewed as being in the same three businesses: 1.Operations are infrastructure management 2.The help desk is the customer relationship business 3.System development is product innovation

7 ©2006 Barbara C. McNurlin. Published by Pearson Education.10-7 Introduction cont. Infrastructure management: –Goal = reducing costs Providing infrastructure involves high fixed costs –Battle = build scale –Management focus = Efficiency Standards –As we are seeing with operations and network management Outsourcing?

8 ©2006 Barbara C. McNurlin. Published by Pearson Education.10-8 Introduction cont. Customer relationship: –Goal = provide service –PC support & help desks often outsourced Especially in Europe & Asia (multilingual needs) –Outsourcing offshore = increasing dramatically Product innovation: –Goal = speed Provides nimbleness –Key to success = talent In IT, developers are “king” so they are given the coolest tools –There are a number of management issues surrounding system development: “Staffing, staffing, staffing”, As well as speed & nimbleness

9 ©2006 Barbara C. McNurlin. Published by Pearson Education.10-9 Project Management Today, much organizational work is performed via projects In IS as well as other functions, being able to manage a project to completion, and deliver the expected outcome within the allotted time and budget, has become an increasingly valuable skill

10 ©2006 Barbara C. McNurlin. Published by Pearson Education Project Management What is Project Management? Project Management is simply the management of a project –May sound simple and self-evident BUT = doesn’t make it easy! –Many people get confused/concerned because IT project management contains the dreaded ‘T’ word – Technology In reality IT project management is not that much different from other forms e.g. construction

11 ©2006 Barbara C. McNurlin. Published by Pearson Education Project Management What is Project Management? cont. A project is a collection of related tasks and activities undertaken to achieve a specific goal. All Projects (IT or other) should: –Have a clearly stated goal –Be ‘finite’ Clear beginning & end IT Project Management: –10% technical, 90% common sense –Management styles vary as do backgrounds –Key = keeping in mind, and under control the numerous interdependencies –GET THE JOB DONE!

12 ©2006 Barbara C. McNurlin. Published by Pearson Education Project Management What is Project Management? cont. Project Management Institute –Project Management encompasses five processes 1.Initiating 2.Planning 3.Executing 4.Controlling, and 5.Closing –To become a certified PMP = must pass tests covering nine knowledge areas: 1.Integration 2.Scope 3.Time 4.Cost 5.Quality 6.Human Resources 7.Communication 8.Risk 9.Procurement

13 ©2006 Barbara C. McNurlin. Published by Pearson Education Project Management The Job of a Project Manager Responsible for the following tasks: 1.Setting Up the Project Why –A brief background of the project, and –The business objectives to be achieved What –Key outputs to be produced –Benefits When –List of milestones and expected timing High level project plan Who –Project team –Stakeholders – and their expectations How –Definition of the work that needs to be undertaken –Scope –Specific exclusions

14 ©2006 Barbara C. McNurlin. Published by Pearson Education Project Management The Job of a Project Manager cont. Responsible for the following tasks cont.: 2.Managing the Schedule Schedule / project plan = heart of the project and main communication tool High level first – then break down as you proceed Baseline and track Use automated tools Recommendations: 1.Focus on the date that tasks are/ will be completed rather than on the % of overall project completed 2.Review progress at least monthly, preferably more often 3.Focus on tasks to be completed Vs. those finished 4.Reforecast when new evidence comes to light

15 ©2006 Barbara C. McNurlin. Published by Pearson Education Project Management The Job of a Project Manager cont. Responsible for the following tasks cont.: 3.Managing the Finances Financial plan, who is accountable, benefits etc. Baseline costs and track –They will change! Need to know how much has been spent and how much money is left 4.Managing the Benefits Difficult to estimate but must try Base on same assumptions as costs Look at timings Track Why are we doing this???? –Should we still be doing it?

16 ©2006 Barbara C. McNurlin. Published by Pearson Education Project Management The Job of a Project Manager cont. Responsible for the following tasks cont.: 5.Managing Risks, Opportunities and Threats Risk mitigation and risk management Usually poorly done Risk logs Issue management 6.Soliciting Independent Reviews Health checks (of the project) –By someone independent (could be external)

17 ©2006 Barbara C. McNurlin. Published by Pearson Education Case example: A Day in the Life of a Project Manager Jan. 28: The Project Manager’s Prayer Feb. 3: Project Benefits – Mapping the Minefield Feb. 7: Project Benefits – A Trail Through the Swamp Feb. 10: It’s All About the Interface Feb. 15: Inventories of Content – Part 1 Feb. 20: Inventories of Content – Part 2 Feb. 24: Magic Happens March 1: Structure – Function March 4: Trade Shows, Tom Peters, and Martinis March 18: Project Management Tools – The Hourglass March 23: Project Management Tools – The Scope Axe April 20: If You Measure It, They Will Come (Back) May 25: Project Management Tolls – My Pants are on Fire 1 ……..

18 ©2006 Barbara C. McNurlin. Published by Pearson Education Project Management Change Management IS often assume a technically elegant system is a successful system. (IT’S NOT!!!) Many technically sound systems have turned into implementation failures because the people side of the system was not handled correctly System is only a success if it meets the users’ requirements and they are happy with it and with using it Information technology is all about managing change New systems require changing how work is done Focusing only on the technical aspects is only half the job – the other job is change management

19 ©2006 Barbara C. McNurlin. Published by Pearson Education Project Management Change Management cont. Changing management = process assisting people to make change in their working environment –Change – caused by the introduction of a new computer system People resist change, especially technological change, when they view it as a crisis. ‘Resistance’ includes: –Deny the change –Distort information they hear about the change –Convince themselves and others the new system will not change status quo

20 ©2006 Barbara C. McNurlin. Published by Pearson Education Project Management Change Management cont. ODR (among others) offers a methodology to help companies manage technological change Type of people involved in a change project –Sponsor: the person or group that legitimizes the change –Change agent: the person or group who causes the change to happen –Target: the person or group who is being expected to change and at whom the change is aimed

21 ©2006 Barbara C. McNurlin. Published by Pearson Education Project Management Change Management cont. Methodology to manage technological change Conduct surveys with all three groups to determine: –Whether the scope of the project is do-able, or whether the organization is trying to change too much at one time –Whether the sponsors are committed enough to push the change through, or whether they are sitting back expecting the organization to change on its own –Whether the change agents have the skills to implement the change, or whether e.g. they are not adept at rallying support –Which groups are receptive to the change and which are resistant

22 ©2006 Barbara C. McNurlin. Published by Pearson Education THE BOC GROUP Case Example – Change Management Industrial gas manufacturer – operates in 60 countries Industry= mature & highly competitive Competition = price & service $35million to improve position – reengineering BOC’s core processes: –9 reengineering projects over 2 ½ years –All team members guaranteed a job after project in same or equivalent work –Teams co-led by Business and Information Management (IM) process leader, as IT major component of project

23 ©2006 Barbara C. McNurlin. Published by Pearson Education THE BOC GROUP Case Example – Change Management cont. Each team member studied everything, not just a selected area: –Existing processes –How implementation should be handled –Input into the training plan –Devise the customer communication plan Garnering True Executive Sponsorship –President = Executive Sponsor for all teams – not intimately involved with project –Vice presidents & directors = true executive sponsors ODR teach sponsorship to the nine sponsors over 2 days –Sponsors reluctant to go off site – they see no relevance to program as they could not see any problems

24 ©2006 Barbara C. McNurlin. Published by Pearson Education THE BOC GROUP Case Example – Change Management cont. The workshop allowed sponsors to deal with issues of the company’s ability to assimilate change, obstacles and so on Realization: –Teams can only put the tools in place; the organization had to make the change happen –Sponsors need to drive change through the organization – planning their own strategies and examining possible consequences

25 ©2006 Barbara C. McNurlin. Published by Pearson Education THE BOC GROUP Case Example – Change Management cont. One Change Project Process of paperwork for delivering gas products and invoicing customers –Handwritten – into – Point of Delivery handheld Device (PODD) –PODD: Schedules downloaded overnight = pack truck in night PODD accept signature of customer – print a receipt Billing data automatically transmitted to headquarters Team members absorb each others’ knowledge and become one entity rather than two

26 ©2006 Barbara C. McNurlin. Published by Pearson Education THE BOC GROUP Case Example – Change Management cont. Involving Middle Management Advisory council: –Upward job – provide feedback on recommended changes and implementation issues –Downward job – describe recommendations to employees & get their buy-in

27 ©2006 Barbara C. McNurlin. Published by Pearson Education THE BOC GROUP Case Example – Change Management cont. Training the Drivers Created a six-hour training course –“A Day in a Driver’s Life”  Perfect day with PODD (handheld device)  Harder scenarios Success – PODD team assessed its people aspects at the outset & mitigated the identified risks by: –Holding the sponsorship event –Involving middle management via the advisory council –Thoroughly informing and training the truck drivers

28 ©2006 Barbara C. McNurlin. Published by Pearson Education Project Management Risk Management Not all IT-based projects succeed –Many fail, especially the really large ones e.g. ERP, CRM –30 to 70% fail –Why? = Do not overcome their risks Technical Business Technical risks –Sub-performance, scope creep making it too complex –Can’t always be predicted but they can be contained Business risks –Business does not change properly to use the new systems –Are not as easily righted Need to: 1.Assess the risk 2.Mitigate the risk 3.Adjust the project management approach

29 ©2006 Barbara C. McNurlin. Published by Pearson Education Project Management Risk Management cont. Step 1: Assess the Risks –Three predominant risk factors: 1.Leadership of the business change 2.Employees’ perspective of the change 3.Scope and urgency of the change Decision tree (Figure 10-1) Project leader = executive(s) responsible for the change –Must be a business executive It is the business, not IT that is required to change Contributes to success/failure? – 6 questions: 1.Are they committed to the business case? 2.Do they understand the extent of change in work behaviour required for the project to succeed? 3.Are they formally motivated to pull off the change? 4.Are they at the appropriate org. level with the formal power…..? 5.Do they have experience with a project of similar scope, urgency and people impact? 6.Do they have informal power, such as credibility and respect?

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31 ©2006 Barbara C. McNurlin. Published by Pearson Education Project Management Risk Management cont. Step 2: Mitigate the Risks –Project management styles Authoritative Vs. Participative –Project’s budget and timeframe Rigid Vs. Adjustable –Figure 10-2 Big Bang –Only appropriate when all 3 factors = positive Improvisation –Leadership and employee = positive but scope or urgency place the project at risk Committed workforce can adapt etc. Guided Evolution –Used when only the employee perception is negative Can be overcome by involving them Top-down Coordination –Only works when the leadership factor supports the business change and when the leadership is respected, full-time and highly experienced in leading business change

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33 ©2006 Barbara C. McNurlin. Published by Pearson Education DOW CORNING Case Example: Project Management Successful ERP implementation from 1995 to 1999 Each project phase had different business risks –Realizing this the project executive took a different project management approach in each phase Phase 0: Get Ready –Leadership = High Risk –Employee Perception = High Risk –Scope and Urgency = High Risk Phase 1: Understand the New System –Use the Improvisation approach of participative management and flexible deadlines Concerned re employee reticence in the later phases so focus = on building commitment Phase 2: Redesign the Work Processes –Use the Guided Evolution approach of participative management with fixed deadlines Phase 1 = got hem committed but did little to get the work processes redesigned Continued through the pilot – cutover to SAP at newly acquired European sub.

34 ©2006 Barbara C. McNurlin. Published by Pearson Education DOW CORNING Case Example: Project Management cont. Phase 3: Implement the ERP Worldwide –Use Top-down coordination with an authoritative management style and flexible timelines Pilot’s success demonstrated management’s determination and shifted employee perception to the positive Scope shifted to negative because it was ‘company wide’ Phase 4: Complete Implementation –Use the Big Bang approach of authoritative management and firm deadlines By the end of 1998, most of the sites had implemented so all the risk factors had turned positive Initially conversion took 18 months. These later sites = 4

35 ©2006 Barbara C. McNurlin. Published by Pearson Education Tips for Good IT Project Management Establish the Ground Rules –Open systems, industry standards, web-enabled etc. Foster Discipline, Planning, Documentation and Management –If the process is not controlled properly, anything can happen or, more realistically, potentially nothing will happen Obtain and Document the ‘Final’ User Requirements –Don’t get too technical Obtain Tenders from All Appropriate Potential Vendors Include Suppliers in Decision Making Convert Existing Data –Task might appear quite simple but often causes the biggest headaches Follow Through After Implementation –Cross the t’s and dot the i’s in terms of documentation, future maintenance processes etc.

36 ©2006 Barbara C. McNurlin. Published by Pearson Education Reasons for Success Proper Planning Appropriate User Involvement Strong Visible Management Support Project Manager(s) with Power and Time Good Change Management Working As A Team Proper Project Monitoring and Control Proper Project Closure

37 ©2006 Barbara C. McNurlin. Published by Pearson Education Project Management Reasons for Success cont. In all circumstances: KEEP YOUR FOCUS ON THE END RESULT Look at enablers not obstacles

38 ©2006 Barbara C. McNurlin. Published by Pearson Education Project Management Danger signs Top management informed? Top management involved? Sponsorship? Project planning tools? Scope creep? Status reporting? Current capabilities? IT/business interaction? Training/business change management?

39 ©2006 Barbara C. McNurlin. Published by Pearson Education Improving Legacy Systems Many Information Systems executives feel trapped by the past: –Old legacy programs & data they would love to replace –However, replacement is not the only option  In many cases = not even the wisest –Possibly = only delay (the inevitable?)

40 ©2006 Barbara C. McNurlin. Published by Pearson Education Improving Legacy Systems: To Replace or Not to Replace? Upgrading – sometimes makes more sense –More difficult (to sell?) –Not as exciting as a totally new system –Most replacement projects that failed could have been upgrade projects Many reverted to upgrading anyway When a systems technology is so obsolete that it does not exist in many places, then replacement is probably the only choice – BUT otherwise – perform 3 analyses: 1.Rigorous analysis of the costs and benefits the new system 2.Determine how specialized the new system really is Sometimes = think you need ‘made to order’ when purchased would do just fine KISS 3.Assess the IS staff’s capabilities honestly Can they do the job?

41 ©2006 Barbara C. McNurlin. Published by Pearson Education Improving Legacy Systems: Options for Improving a Legacy System Figure 10-3 illustrates the choices companies have with dealing with legacy systems –Analogy with a home The options can be performed: –In-house or –Outsourced – including: Transitional Part

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43 ©2006 Barbara C. McNurlin. Published by Pearson Education Improving Legacy Systems: Options for Improving a Legacy System cont. 1.Restructure the system: House = updating the look of a room e.g. repainting or getting rid of clutter Applicable to systems that are basically doing the job but run inefficiently or are “fragile.” Seven Steps in restructuring: 1.Evaluate the amount of structure in the current system - number of layers of nesting, degree of complexity, etc. –Use tools to trace program control logic 2.Compile the program, to be sure it is in working order

44 ©2006 Barbara C. McNurlin. Published by Pearson Education Improving Legacy Systems: Options for Improving a Legacy System cont. 1.Restructure the system cont.: 3.Run the program through a structuring engine, which cleans up and restructures the code, following structured programming concepts –This process does not change the logic of the program, but replaces poor coding: Reduces number of ‘GOTOs’ Removes dead code Highlights loops, and Groups input/output 4.Reformat the listing to make it easier for programmers to understand 5.Ensure that the old and new versions produce the same output –File to file comparator 6.Minimize overhead introduced by restructuring (optimizer package) 7.“Rationalize” the data by giving all uses of the same data one data name

45 ©2006 Barbara C. McNurlin. Published by Pearson Education Improving Legacy Systems: Options for Improving a Legacy System cont. 2.Reengineer the system: A step beyond restructuring, implies extracting the data elements from an existing file and the business logic from an existing program and moving them to an existing platform. See Life Cycle Figure 10-4 House = fixing what isn’t working 1.Reverse engineering: existing programs, along with their files and DB descriptions, are converted from their implementation level description to their equivalent design level components 2.Forward engineering: from requirements level to operational systems

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47 ©2006 Barbara C. McNurlin. Published by Pearson Education GTE DIRECTORIES Case Example: Reverse Engineering Produced, marketed, distributed telephone directories in 14 countries The directory publishing system had four main databases, designed application-by- application, so the data elements were difficult to change, enhance, and reuse –The data administration group acquired reverse engineering tools to help them improve these databases

48 ©2006 Barbara C. McNurlin. Published by Pearson Education GTE DIRECTORIES Case Example: Reverse Engineering cont. In another project, the company used an automated tool to reverse-engineer a poorly designed database from its physical model to its data model, and then create a properly designed data model using entity relationship modeling techniques In a third project, database administrators reused some data elements in a large database for a new production scheduling system, again using reengineering tools

49 ©2006 Barbara C. McNurlin. Published by Pearson Education Improving Legacy Systems: Options for Improving a Legacy System cont. 3.Refurbish the system House = enhancing the usefulness by replacing furniture, landscaping etc. If the old system is maintainable and causing no major problems; it may be worthwhile to add ‘extensions’ –Potential extensions: Supply input in a new manner Make new uses of input, or Allow the programs to deal more comprehensively with the data Occurring quite a bit these days with the ‘web’ –Old system an ‘untouchable’ black box surrounded by new systems Note: this method was popular even before the ‘web’

50 ©2006 Barbara C. McNurlin. Published by Pearson Education Improving Legacy Systems: Options for Improving a Legacy System cont. 4.Rejuvenate the system: House = adding new functions e.g. new room, pool etc. Adding new functions to a reengineered system to make it more valuable. Phases of rejuvenation process: 1.Recognize a system’s potential –First clean up existing system using code restructuring tools and then building from there 2.Clean up the system –Transform the poorly structured COBOL code into more structured, maintainable code 3.Make the system more efficient –System can be converted to a new operating environment and a new file structure, together with manual tuning and enhancements to reduce system processing time 4.Give the system a strategic role –To answer the question “How can we provide even more timely information or improve competitive position in the marketplace.” e.g. allowing it to feed a data warehouse

51 ©2006 Barbara C. McNurlin. Published by Pearson Education AMAZON.COM Case Example: System Rejuvenation 2002 – initiated its Web Services program where anyone can receive a license to access Amazon’s data and content via XML feeds – for free –Restrictions, copyright etc. Numerous (>27,000) with various third-party offerings Amazon takes the risk of not controlling how others use its information, but in return, others are creating gadgets, links, services and software that Amazon.com could not build itself Looking to transform from a retailer into an e- commerce platform In short = it is using Web Services to rejuvenate its data, giving it a strategic role via XML

52 ©2006 Barbara C. McNurlin. Published by Pearson Education Improving Legacy Systems: Options for Improving a Legacy System cont. 5.Rearchitect the System: House = rethinking the use of space by perhaps gutting a major portion of the house and remodelling it This option involves having a to-be architecture for new systems, then using that architecture to upgrade legacy systems Previously not seen as necessary, IT architectures = now mandatory Where possible CTOs work hard to migrate their enterprise to that desired to-be architecture, generally one system at a time

53 ©2006 Barbara C. McNurlin. Published by Pearson Education TOYOTA MOTOR SALES Case Example: Rearchitect the System This car manufacturer began building an IT architecture by creating a standard, integrated application development environment in order that all systems would be developed in the same way The chief architect then used her budget to describe the as-is architecture of Toyota’s six largest systems Then Toyota defined the global to-be architecture –Which was used to convince the business that remediating some pieces of a legacy system would both upgrade the system and move it toward the to-be architecture and would cost a lot less than full replacement The architecture thus helped the company: –Remediate legacy systems –Keep systems designs robust –Deliver applications faster, and –Permit future flexibility

54 ©2006 Barbara C. McNurlin. Published by Pearson Education Improving Legacy Systems: Options for Improving a Legacy System cont. 6.Replace with a Package or Service: to move an old application to a new operating environment, e.g.: centralized to distributed, e.g., SAP –This alternative has become the norm; another option, one being touted as “the future,” is to replace a system with a service delivered over the Internet –House = move! 7.Rewrite the System: if too far gone to rescue, obsolete technology; beware of true cost and risk failure –RARE! = only ‘specialized’. Normally = go for a package –House = knock down and build a new one

55 ©2006 Barbara C. McNurlin. Published by Pearson Education WACHOVIA Case Example: Replacement of a System Large US bank Contact management system (sales) –Original programmers had left bank –Being maintained by consultants –Did not work with newer bank systems –So inflexible = did not support the bank’s newer sales processes –Sales force had work-arounds and only used it to record basic customer information once they had closed a sale Decided to replace with a full CRM –Looked at various CRM packages Expensive and time-consuming –Saw and ‘purchased’ Web-based pay by use CRM (Salesforce.com) Up an running in 6 weeks Costs basically the same as maintenance costs for the old system Extensively used Provides necessary management information

56 ©2006 Barbara C. McNurlin. Published by Pearson Education Part III Discussion Case A DREAM PROJECT TURNS NIGHTMARE: HOW FLAWLESS SOFTWARE NEVER GOT IMPLEMENTED

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60 ©2006 Barbara C. McNurlin. Published by Pearson Education Measuring the Benefits of Systems Measuring the value of Information Systems seems to be a continuing request –Never mind that the Internet has changed the world or that e-commerce and e-business are impossible without computers Executives want specific links between new systems and corporate financial measures e.g. –Increase in earnings –Shareholder value –Revenue

61 ©2006 Barbara C. McNurlin. Published by Pearson Education Measuring the Benefits of Systems cont. Achieving this is very difficult because IT is only one of many factors contributing to the successful use of systems –e.g. the value of decision support systems and data warehouses are difficult to measure because they are intended to change such un-measurable actions as: Improved decisions Better identification of opportunities More thorough analysis Enhanced communication among people

62 ©2006 Barbara C. McNurlin. Published by Pearson Education Measuring the Benefits of Systems cont. E-commerce systems, which aim to improve a firm’s competitive edge or protect its market share, also elude measurement New market systems –How do you calculate ROI? Infrastructure investments (upon which future applications will be built) often cannot be justified on ROI because they have none! Can’t however just say “it’s too hard” Three (of many!) suggestions on how to deal with these measurement dilemmas: 1.Distinguish between the different roles of systems 2.Measure what is important to management 3.Assess investments across organizational levels

63 ©2006 Barbara C. McNurlin. Published by Pearson Education Measuring the Benefits of Systems cont. Distinguish Between the Different Roles of Systems Information systems can play three roles in a company: 1.Help other departments do their job better: “support systems” with the goal to increase organizational efficiency 2.Carry out a business strategy: e.g. CAD systems that customers and suppliers can use together to design custom products  Differ from support systems because they are used by customers 3.As a product or service as the basis for a product or service: e.g. testing or design software that a company sells to another firm Measuring the benefits of these three kinds of systems differs

64 ©2006 Barbara C. McNurlin. Published by Pearson Education Measuring the Benefits of Systems Distinguish Between the Different Roles of Systems cont. 1.Measuring Organizational Performance: –Meeting deadlines and milestones –Operating within budget –Doing quality work Performance measures internal efficiency of operations 2.Measuring Business Value: –Deals with marketplace goals They must have a direct impact on the company’s relationships with customers, clients, or suppliers; e.g. sales/customer 3.Measuring a Product or Service: –An IS offered as a product or service to produce revenue = measured as any other business venture e.g. by ROI

65 ©2006 Barbara C. McNurlin. Published by Pearson Education Measuring the Benefits of Systems Measure What Is Important to Management IS support can only be linked to corporate effectiveness by finding all the indicators management use, besides the traditional financial ones Measure in terms like: –Customer relations (incl. satisfaction) –Employee morale –“Cycle time” How long to accomplish a complete assignment; fast cycle time might mean higher-quality products, beating competitors to the market, winning a bid, etc.

66 ©2006 Barbara C. McNurlin. Published by Pearson Education IT benefits cross organizational levels, sources of value at three levels: –Individual –Division –Corporation Impact focus of an IT investment extends to –Economic performance payoffs - market measures of performance –Organizational process impacts - process change –Technology impacts - key functionality Combine views to form a 3 x 3 matrix Used by a trucking firm who uncovered benefits that otherwise would have gone unrealized Measuring the Benefits of Systems Assess Investments Across Organizational Levels

67 ©2006 Barbara C. McNurlin. Published by Pearson Education A TRUCKING COMPANY Case Example: Assess Investments Across Organizational Levels Small trucking company in the refrigerated carrier business, experienced 50% loss in market share $10M investment in IT to differentiate itself and manage the company by information. Installed satellite system and computer in each truck to be in constant communication with customers Measures: –Driver productivity up by.5 hr./day (BIG $$) –Improved load truck matching 1% deadhead time –Customers willing to pay premium for ability to communicate - unexpected revenue benefits

68 ©2006 Barbara C. McNurlin. Published by Pearson Education Do Investors Value IT Investments? An even more intriguing question than how business executives value IT investments is how investors value IT investments A study found that every $1 invested in computers yielded up to $17 in stock market value – and no less than $5 –Whereas, $1 invested in property, plant, and equipment (book value) only yielded $1 in stock market value; and –$1 investment in other assets (inventory, liquid assts, and accounts receivables) yielded only 70 cents

69 ©2006 Barbara C. McNurlin. Published by Pearson Education Do Investors Value IT Investments? cont. The researchers reason that investors value $1 spent on computers more than the other investments because it leads to organizational changes that create $16 worth of “intangible assets” – know-how, skills, organizational structures, and such Investments in “organizational capital” generally lead to adopting decentralized work practices: –Using teams more often –Giving employees broader decision-making authority, and –Offering more employee training Firms with these three decentralized work practices had a market value of 8 percent higher than the mean

70 ©2006 Barbara C. McNurlin. Published by Pearson Education Conclusion Managing projects has always been one of the most important, and toughest, jobs in the IS organization Even with outsourcing and software packages, project management belongs in-house because responsibility for project success remains in house Project management skills = critical People job in system development: –Managing development staff –Helping people adjust to the organizational changes that occur with a new system Successfully implementing systems: –Sponsors understand their role in enforcing change – giving change agents the tools & skills to foster the change –Assisting the targets in making the change – providing training etc.

71 ©2006 Barbara C. McNurlin. Published by Pearson Education Conclusion cont. Software – difficult to keep up-to-date: –Variety of options (refurbish etc.) as well as replacing it with a package –New alternative = rearchitect the system toward a desired “to be” architecture –“Rent” software off the Web, per seat, per month Process of justifying a new system can uncover what is important to management Measuring benefits afterward can help companies spot benefits they had not originally planned Investors more highly value companies with higher IT investments and more distributed work practices

72 ©2006 Barbara C. McNurlin. Published by Pearson Education Part III Discussion Case A DREAM PROJECT TURNS NIGHTMARE HOW FLAWLESS SOFTWARE NEVER GOT IMPLEMENTED

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